Icon Health & Fitness Inc. v. NVC Logistics Group, Inc.

MEMORANDUM DECISION AND ORDER GRANTING MOTION TO
VACATE ENTRY OF DEFAULT

JILL
N. PARRISH UNITED STATES DISTRICT COURT JUDGE

I.
BACKGROUND

Icon
Health & Fitness, Inc. sells fitness equipment, such as
treadmills. Towards the end of 2014, Icon engaged the
services of a shipping company, NVC Logistics Group, Inc. NVC
agreed to arrange the “final stretch” of delivery
of Icon products to Icon customers. The parties never
executed a written agreement but did business for several
years. During this time, Icon products were allegedly lost,
stolen, and damaged while in transit. Icon requested
reimbursement by submitting claims to NVC. But, according to
Icon, NVC refused to pay valid claims. Consequently, Icon
brought suit on December 12, 2016, alleging that NVC is
liable for the value of the lost, stolen, and damaged goods.

NVC is
a New Jersey corporation. On or about November 23, 2016, NVC
retained Floyd Cottrell and Andrew Pinon to serve as lead
counsel in connection with this case. Messrs. Cottrell and
Pinon work at Cottrell Solensky, P.A., a law firm based out
of Newark, New Jersey. After being retained as lead counsel,
Messrs. Cottrell and Pinon engaged the services of Michael
Mills. Mr. Mills works at Bauman Lowe Witt & Maxell,
PLLC, a law firm based out of Las Vegas, Nevada. NVC
understood that Mr. Mills would act as local counsel. Mr.
Mills is a member of the Utah State Bar and admitted to
practice in United States District Court for the District of
Utah. But he informed NVC that he could not
“formally” act as local counsel as he did not
have an office in Utah.

On
January 24, 2018, Mr. Mills filed a motion to withdraw as
counsel. Mr. Mills stated that he had unpaid invoices dating
back to January 2017 and that NVC had failed to pay the
invoices, despite numerous requests for payment. Mr. Mills
further stated that he had sent a copy of the motion to
withdraw to Francis J. McCabe, the President and General
Counsel of NVC.

According
to NVC, it received a letter from Mr. Mills on January 24.
The letter contained Mr. Mills' motion to withdraw. But
NVC “mistakenly believed that the envelope containing
the Motion to Withdraw was a hard copy of [Icon's]
discovery demands.” So, presumably, NVC threw away the
letter without looking at the contents.[1] Mr. Mills also
sent NVC an email on the same day. According to NVC, the
email concerned Mr. Mills' correspondence with Icon and
“did not mention the filing of, or serving [of], the
Motion to Withdraw.”

The
court granted Mr. Mills' motion on January 26. The court
also ordered that NVC, as a corporation, was required to be
represented by an attorney who is admitted to practice in the
United States District Court for the District of Utah. The
court specified that NVC's “new counsel” was
required to file a notice of appearance within twenty-one
days from the date of the court's order. That is,
whomever NVC retained as local counsel was required to file a
notice of appearance before February 16.

According
to NVC, it failed to retain local counsel by February 16
because it was not aware that Mr. Mills withdrew as local
counsel. On March 6, Icon moved for the entry of a default
against NVC based on the fact that no appearance on behalf of
NVC had been filed. On March 21, the court directed the clerk
of the court to enter a default against NVC. The clerk of the
court issued a default certificate two days later.

According
to NVC, it received the default certificate on March 27. Two
days later, it learned that the court had directed the clerk
of the court to issue a default certificate based on the fact
that no appearance of local counsel on behalf of NVC had been
filed. At this point, NVC claims that it
“immediately” began to look for new local
counsel. NVC retained new counsel, Sarah Vaughn, on April 6.

On
April 13, NVC, through Ms. Vaughn, filed a motion to vacate
the entry of default. NVC contends that its failure to abide
by the court order directing it to obtain local counsel
within twenty-one days was not willful. Accordingly, NVC
requests that the court set aside the certificate of default.

II.
DISCUSSION

Under
Rule 55(a) of the Federal Rules of Civil Procedure,
“[w]hen a party against whom a judgment or affirmative
relief is sought has failed to plead or otherwise defend, and
that failure is shown by affidavit or otherwise, the clerk
must enter the party's default.” The entry of a
default is merely an official recognition that one party is
in default-it “is an interlocutory step that is taken
under Rule 55(a) in anticipation of a final judgment by
default under Rule 55(b).” 10A Charles A. Wright,
et al., Federal Practice & Procedure § 2692
(4th ed.). The court, however, “may set aside an entry
of default for good cause.” Fed.R.Civ.P. 55(c).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Here,
NVC has shown good cause to set aside the entry of default.
First, NVC has shown that the default was not willful. NVC
has put forth evidence showing that it was not aware that Mr.
Mills withdrew as local counsel. And by extension, NVC was
unaware that it was required to retain new counsel.
Admittedly, NVC was unaware that Mr. Mills withdrew based on
its own negligence (i.e., discarding Mr. Mills'
letter without reading it). At most, NVC was reckless as to
the fact that it was violating a court order. But there is no
indication that NVC willfully ignored this court's order.
And NVC promptly retained Ms. Vaughn to act as ...

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